Breakdown:

1. Introduction to the Lawsuit:
   • The conclusion of Diddy’s lawsuit against Diageo, which centers on the core principles of supply, demand, and ownership, is a crucial case study for entrepreneurs. Diddy (Sean Combs) owned 50% of DeLeón tequila, while Diageo, a global beverage giant, owned the other 50%. Diageo was responsible for supply and distribution, and the imbalance of power in controlling supply would prove critical.
2. Supply and Demand Manipulation:
   • Diageo controlled the supply of DeLeón, making only a limited amount of the product and restricting its availability to select locations, primarily in urban areas. This artificial restriction of supply hindered the brand’s growth and revenue, essentially capping Diddy’s ability to scale and profit from the business.
   • While Diddy had turned the fortunes of Cîroc (where he didn’t have ownership) from a failing brand to a multimillion-dollar success, DeLeón was different because he owned 50%. Diageo stood to lose more by paying him larger profits due to this ownership stake, unlike with Cîroc, where they only owed him royalties for marketing.
3. Diddy’s Full Sales Mode and Diageo’s Resistance:
   • Once DeLeón launched, Diddy used his considerable influence and marketing prowess to push sales, just as he did with Cîroc. However, Diageo, realizing the financial implications, responded by limiting supply, particularly targeting the “urban market” and halting advertising budgets for DeLeón.
   • Diddy noticed these patterns and decided to investigate further into Diageo’s production infrastructure. He sent his team to Mexico to assess the agave plants, which are crucial for tequila production. His team discovered that no agave plants had been planted for DeLeón, indicating there was no serious plan to make DeLeón successful. Most of the agave was reserved for Diageo’s more favored brand, Casamigos, which had just made George Clooney a billionaire.
4. Diddy’s Lawsuit and Discrimination Allegations:
   • Infuriated by the apparent discrimination and breach of contract, Diddy filed a lawsuit against Diageo, alleging that the company was intentionally stifling DeLeón’s success and treating it as a lesser, “urban” brand. This lawsuit cited racial discrimination and highlighted Diageo’s bias in supporting brands led by white celebrities over his own efforts with DeLeón.
5. Diageo’s Response:
   • In May 2023, Diddy filed his lawsuit. By June, Diageo publicly denied the allegations, accusing Diddy of attempting to extract billions of dollars through false claims of racism. Diageo then moved to push the dispute into private arbitration, claiming it was a standard business disagreement. However, in September 2023, a judge rejected this motion, allowing the trial to proceed publicly, which further exposed Diageo to scrutiny.
6. Cassie’s Lawsuit and the Ripple Effect:
   • Just a month after the judge’s decision, Cassie (Diddy’s former partner) filed a separate lawsuit, sparking a broader controversy around Diddy. This introduced a snowball effect, with various allegations and media attention directed at Diddy and his business dealings.
7. Settlement and Conclusion:
   • In January 2024, Diddy and Diageo resolved their dispute through a settlement. Both parties released a joint statement indicating that they no longer had any business dealings. As part of the settlement, Diageo gained full ownership of DeLeón, severing all ties with Diddy.
   • Despite his fight, Diddy ultimately lost control of DeLeón, with Diageo walking away with full ownership of the brand. The settlement marked the end of his association with the brand but shed light on the complex dynamics of race, power, and ownership in corporate America.
8. Key Lessons for Entrepreneurs:
   • Control Over Supply: When entering business partnerships, especially in industries like spirits, entrepreneurs must secure control over supply and distribution to avoid dependency on larger corporations that may manipulate the market.
   • Ownership Matters: Diddy’s fight with Diageo emphasizes the importance of ownership. While he made millions with Cîroc, his limited control meant that Diageo retained the lion’s share of profits. DeLeón’s 50/50 ownership split presented more financial leverage, but it also made Diddy a bigger threat to Diageo.
   • Discrimination in Business: The case also highlights ongoing racial disparities in the business world, where even highly successful Black entrepreneurs face systemic barriers and are relegated to “urban” or niche markets, despite their potential to compete on a global scale.

This case study of Diddy vs. Diageo illustrates the importance of strategic partnerships, the power dynamics of supply and demand, and the fight for equitable treatment in the business world.

4o